We Discuss Why Allogene Therapeutics, Inc.'s (NASDAQ:ALLO) CEO Compensation May Be Closely Reviewed

Key Insights

• Allogene Therapeutics to hold its Annual General Meeting on 5th of June
• Total pay for CEO David Chang includes US$724.0k salary
• The overall pay is 347% above the industry average
• Allogene Therapeutics' EPS declined by 7.5% over the past three years while total shareholder loss over the past three years was 91%

The results at Allogene Therapeutics, Inc. (NASDAQ:ALLO) have been quite disappointing recently and CEO David Chang bears some responsibility for this. At the upcoming AGM on 5th of June, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for Allogene Therapeutics

How Does Total Compensation For David Chang Compare With Other Companies In The Industry?

Our data indicates that Allogene Therapeutics, Inc. has a market capitalization of US$507m, and total annual CEO compensation was reported as US$14m for the year to December 2023. We note that's a small decrease of 5.0% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$724k.

On comparing similar companies from the American Biotechs industry with market caps ranging from US$200m to US$800m, we found that the median CEO total compensation was US$3.1m. Hence, we can conclude that David Chang is remunerated higher than the industry median. Furthermore, David Chang directly owns US$18m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	US$724k	US$724k	5%
Other	US$13m	US$14m	95%
Total Compensation	US$14m	US$15m	100%

On an industry level, around 23% of total compensation represents salary and 77% is other remuneration. Allogene Therapeutics pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Allogene Therapeutics, Inc.'s Growth

Over the last three years, Allogene Therapeutics, Inc. has shrunk its earnings per share by 7.5% per year. In the last year, its revenue is down 30%.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Allogene Therapeutics, Inc. Been A Good Investment?

Few Allogene Therapeutics, Inc. shareholders would feel satisfied with the return of -91% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Allogene Therapeutics (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Allogene Therapeutics is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.